FHA Reform Dropped from House Economic Stimulus Plan

As the House readies a vote on a $146 billion economic aid plan today, one key piece of mortgage legislation has been dropped under pressure from Bush administration officials.

The Associated Press reported Tuesday morning that House lawmakers had removed FHA reform provisions from the proposed stimulus package, although a temporary increase in FHA lending limits will remain.

The original plan had called for passage of the FHA Reform Act as well as instituting a permanent increase in FHA lending limits, from $362,790 to as high as $729,750 in high-cost areas; the Act had been passed by the Senate in December, and members of the House and Senate had agreed in principle to a final version of the bill.

Instead, FHA reform appears as if it will wait for passage at a later date. From the AP’s coverage:

Democrats believed that the Bush administration was amenable to making that limit [FHA lending limits] permanent. But the Treasury Department insisted over the weekend on making the new FHA limits expire by year-end, Steve Adamske, spokesman for Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said Tuesday.

The administration also swayed House lawmakers to narrow the legislation so that it focused on hiking the loan limits, rather than establishing a broader overhaul of the agency, which was created during the Great Depression to aid cash-strapped borrowers.

“We’re baffled by this,” Adamske said, noting that the Bush administration has been advocating similar legisltion for months. “When push came to shove, they didn’t want to pass it as soon as it was possible.” Jennifer Zuccarelli, a Treasury Department spokeswoman, said in an e-mail message that legislation overhauling the FHA and government sponsored mortgage companies Fannie Mae and Freddie Mac “should be completed as soon as possible on a separate track from the stimulus package.”